EVALUATE ROLE OF GLOBALISATION WITH SPECIAL REFERENCE TO INTERNATIONAL TRADE

Globalisation would refer to more & more interaction of different cultures, races ,creeds, religion in a quest to know more about different peoples, their manner of living ,& then gradually co-operating with each other in fields of sciences, sports, economics, cultural legacy and heritage, in a way  which is mutually beneficial to all.

Even in historic times man had a quest to explore new things,new places for settlement ,new technology for easing of life,& that sole query motivated him to create wonders.These tendencies have been witnessed & will always remain.

Great explorers in history searched new lands & sea routes & paved path for trade to follow through sea route.

Those land discoveries made it easy to settle colonies & then exploit all possible transport of raw materials.

Today around 90% of world trade is carried by international shipping industry. Without shipping the import & export of goods on the scale necessary for the modern world would not be possible. Sea borne trade continues to expand ,bringing benefits for consumers across the world through competitive freights costs. As of now there are over 50,000 merchant ships trading internationally ,transporting every kind of cargo. World fleet is registered in over 150 nations,& manned by over a million sea farers of virtually every nationality. Even in terms of our own Indus valley civilization, trade[international]via ancient Indus delta port Barbarican & river Indus with Middle East & other parts of world has existed for over five thousand years.

Today world’s nation are highly interlinked as of bilateral or multilateral trade ties. Globalisation ensures that more & more such activities take place & even at diplomatic levels settle tensed issues. This can be written giving special reference of nation like Iran.

Iran has been blamed by U.S for carrying nuclear enrichment programme not for mere civilian purpose. Iran has been irresponsible at diplomatic levels & which gets reflected in its language of Iranian leadership. Rarely one would see a leader of a nation going to an extent & releasing statement as such’’ to wipe out a Jewish state’’.

More and more of international trade comes with few external compulsions & boundation within which a nation has to function. It is generally believed that if a nation of a section in more and more globalised world, is disruptive, problematic or unsatisfied ,first of all initiations are done to settle matters with dialogues at leadership levels. Economic sanctions are the next steps in direction of restoring normalcy by pressurizing leadership as it becomes difficult for nations to isolate themselves completely from the rest of world. Military strike or strategic warfare is the last considered option.

As OF NOW IN 2012,usa FROZE ALL THE PROPERTY OF Iran’s central bank and other financial institutions in the US, and European Union’s oil embargo on Iran came into effect.USA has exempted 7 states from sanctions against over Iran oil. These specific waivers were granted to India, SOUTH korea, Malaysia, ,South Africa, Sri Lanka, Taiwan and TURKEY. This specific law was signed in USA in December 2011,which directed that countries have until 28 June to greatly reduce oil imports from Iran or be cut off from USA financial system.

It is as of globalization and international trade that it is still believed that this issue of Uranium enrichment program can be resolved. However Iran does not  seem interested and comes up with intentions to disrupt or exercise  control over Gulf of Hormuz, which if happens will result in unprecedented disruption of global oil Supply and contribute to higher global oil prices.

OPEC ,which is organization of Petroleum economies has said that crude oil production for its member ,not including Iraq, stood at 28.1 million barrels per day in July ,a decline of 270,000 bpd[barrels per day]compared with the previous months.

This is one of examples of role that globalization and more and more of international trade compulsions are playing. As of latest developments UK based giant bank Standard Chartered ,has been accused by New York regulator [OFAC].US Treasury Department’s office of Foreign Assets Control, of illegally hiding transactions with Iran .Bank has laundered as much as $ 250 bn [161 euro bn ] for nearly a decade.

Another incidence which has happened within past one month & has clearly shocked the economic world is of LIBOR t[London inter-banking lending rate].This incidence has once again unearthed the manner in which  financial services are carried world wide and how regulatory bodies many a times do not function properly and that negligence leads towards collapse of market and deterioration in investor’s faith.

LIBOR [LONDON INTER BANK OFFERED RATE].This is the rate at which banks in London  lend money to each other for short-term in a particular currency. A new LIBOR rate is calculated every morning by financial data firm Thomson Reuters based on interest rates provided by members of British Banker ’s  Association [BBA].

This rate officially came into existence in 1984. LIBOR  rates are calculated  and published daily at 11;30 a;m [GMT] by Thomson Reuters.

Every day a group of  leading banks submit rates for 10 currencies  and 15 lengths of loan[borrowing periods] ranging from overnight to one year .It is a global bench mark interest rate used to set a range of financial deals. It is also a measure of trust in financial  system   and faith banks have in each other’s financial health. LIBOR is used to set arrange of financial transactions  worth an estimated $ 800 trillion which is equal to 12 times of global GDP. Many financial institutions , mortgage  lenders  and credit –card agencies set their own rates relative to it. As early as 2005 there was evidence that Barclay’s had tried to manipulate dollar LIBOR at request of it’s derivative traders and other banks. It was clearly in 2008,Wall Street Journal published a report that questioned integrity of LIBOR.

It was in 20009 BBA had circulated guidelines for all contributor banks on setting   LIBOR rates in same manner. Barclay’s made no change to it’ s system to take account of BBA guidelines .Important rules as such of having distinction between derivatives team and submitters were violated.

It was finally i9n JUNE 2012, Barclay’s admitted to misconduct. The UK’S FSA imposed a euro 59.5 mn penalty.FSA[Financial service authority],US Department of Justice of Commodity futures trading Commission [CFTC]imposed fines worth euro 102 mn and euro 128 mn respectively ,thus way forcing Barclay’s to pay a total of around  euro 290 mn.

When financial crisis peaked in late 2007,many banks stopped  lending to each other over concerns about their financial health with some banks submitting much higher  rates than others.  Barclay ’ s  was the bank which was submitting higher rates. This prompted rumours that Barclay’s was in trouble. This followed a series of internal debate and controversial conversation with bank of England official, Barclay’s began to submit much lower rates. A bank has to pay a higher interest rate to borrow funds if other lending banks have less confidence in it.

Mechanism  with which LIBOR was fixed.

                                                                         A                                 B                                     C                                  D

Bank submit rates-                                    1%                               2%                                    3%                            4%

Lower bottom is discarded-                    1%                                 2%                                   3%                            4%

Avg. is calculated of remainder-                                       2.5 % This is LIBOR.

In same way rates if submitted by 16 banks were considered ,lower and upper 4 rates ,means overall 8 rates were discarded and average of rest 8 were calculated on which transactions took place.

As a consequence  of  it, those paying interest on loans would have benefitted from lower LIBOR rates, savers and investors would have lost out.

Barclay’s had to pay $ 453 million to settle U.S and British authorities’ allegations that British bank had tried to manipulate London interbank offered rate.

Barclay’s will not be the only bank put through wringer over question of rate manipulation .Barclay’s is also likely to face civil cases, as customers on wrong side of LI BOR  movements bring claims.AS of now  at least   12 banks are involved in LIBOR investigations  around the world. Fines on Barclay’s may herald similar penalties on others.

Investigations of more than a dozen bank by authorities on 3 continents are starting   to   unearth evidence  that some banks improperly  sought to alter LIBOR.

Now it is a another case of globally working trade .Analysts say industry  may have to shell out billions of dollars to settle the cases and other  bank chiefs could find themselves in troubles.

Barclay’s in only bank so far to resolve LIBOR-fixing allegation, but roughly a  dozen  banks acknowledged being under criminal or civil investigation in various countries in the matter.

MORE THAN $  800tn in securities are linked to the Libor ,including $ 350 tn in swaps & 10 tn $ in loans ,including home and auto loans. These transactions take place globally.

Britain’s financial services industry is a national asset. It has thrived for many reasons that include London’s   favourable  time –zone, that allows it to trade with Asia and  America .It was a fact of great prestige that Britain did effectively set interest rates for rest of world .As of now Britain’s ability to play by and police the rules is under scrutiny.BBA[British Banker’s Association] is considering a LIBOR revamp. Instead of  estimated  rates actual rates are considered to be used.